Message Mar 1 Sep 2009 08:19

ARM sees exciting opportunities in copper CHARLOTTE MATHEWS

ARM sees exciting opportunities in copper
Published: 2009/09/01 07:02:41 AM

BLACK empowerment mining company African Rainbow Minerals (ARM) saw exciting long-term opportunities in copper, with plans to start building a new copper mine at Konkola North in Zambia by 2011, management said yesterday.

ARM executive chairman Patrice Motsepe said at a presentation on the group’s year-end results that although ARM had evaluated various acquisitions, its best growth opportunities were within its own portfolio.

ARM has interests in platinum, ferrous metals, coal, a stake in gold miner Harmony and a joint venture with Vale in copper and gold exploration in Africa, which includes Konkola North.

A bankable feasibility study is being completed on the viability of building a copper mine at Konkola North with a life of more than 20 years, able to produce about 45000 tons a year of refined copper.

ARM spent more than R10bn on capital projects in the past four years, and expected to spend more than R8bn in the next three years, including on Konkola North. Its commitment to keep spending on growth underscored its view that “the future looks bright”, Motsepe said.

In the year to June, ARM’s sales revenue dropped 20% to R10,1bn compared with last year, reflecting the effects on its operations of the global economic slowdown in the six months to June.

Headline earnings almost halved to 1094c a share from 1906c, and the dividend was cut to 175c a share from 400c.

CEO André Wilkens said the group had moved quickly to restructure to adapt to the global recession. About 2000 jobs were eliminated, mostly workers on short-term contracts but also including 200 of the group’s own employees.

Motsepe said that because ARM was a growth company it tried to keep retrenchments to a minimum, and where possible had moved people to different areas of the operation.

Wilkens said although sales volumes had fallen in almost all the group’s business, particularly manganese ore, its iron-ore sales volumes rose 13% to 7,4-million tons as it brought the first phase of the new Khumani iron-ore mine on stream and its attributable platinum group metals (PGMs) volumes rose 6% to 323259oz .

In the last couple of months of the financial year there had been an uptick in sales of PGMs, thermal coal, chrome ore, manganese ore and ferromanganese alloys.

All the group’s operations were cash-flow positive, despite the difficult operating environment, although ARM Platinum had a negative operating margin of 13% after an accounting adjustment to the value of the debtors’ book because of falling platinum prices.

Costs rose at all of the group’s operations except for iron ore, which benefited from increasing volumes. Wilkens said electricity was generally a small contributor to costs except for the smelters and after recent restructuring within ARM Platinum labour costs would fall.

ARM’s share price fell 1c to R159 on the JSE yesterday, but it is more than double its year’s low of R76.